The past year has been tumultuous for Latin American politics, characterised by a shift to the right in election results and away from populism in policy, and numerous corruption scandals. Current risk levels are likely to linger in the coming year.

On 4 March the Federal Police held former president Lula for questioning in the Lava Jato corruption case. President Rousseff is now less likely to finish her term. This does not necessarily translate into significant policy improvement.

Throughout history Latin America’s fortunes have been tightly linked with commodity prices. It seems we are currently at the end of yet another commodity price cycle. Where does Latin America stand now?

Latin America is slowing down and lower commodity prices play a prominent role. The region is vulnerable to external environment developments, but fairly resilient. Domestic factors give most countries little firepower against external shocks.

Brazil is experiencing the strongest contraction in the last two decades on the back of an unfavourable environment, a frontloaded adjustment of economic policy and prevailing negative sentiment. Increasing political tensions complicate the situation.

Brazil revised its fiscal target downwards significantly. That bodes well for credibility, but also evaporates the room for fiscal slippage. A challenging economic and political environment further complicate the situation.